QUESTION 5 A consumer has utility u (1)=√1 and income $1,600. The cost of going to the doctor is $1,150, and the cost of going to the gym is $150. If the consumer goes to the gym, the probability of getting sick is 20%; if she does not go to the gym, the probability of getting sick is 80%. When sick, the consumer must go to the doctor. An insurance company is offering a health insurance plan with an insurance premium of $230 and a co-pay of $110 (that is, the consumer must pay the $110 if she goes to the doctor). a) The consumer's expected utility from purchasing this insurance and going to the gym is b) The consumer's expected utility from purchasing this insurance and not going to the gym is

QUESTION 5 A consumer has utility u (1)=√1 and income $1,600. The cost of going to the doctor is $1,150, and the cost of going to the gym is $150. If the consumer goes to the gym, the probability of getting sick is 20%; if she does not go to the gym, the probability of getting sick is 80%. When sick, the consumer must go to the doctor. An insurance company is offering a health insurance plan with an insurance premium of $230 and a co-pay of $110 (that is, the consumer must pay the $110 if she goes to the doctor). a) The consumer's expected utility from purchasing this insurance and going to the gym is b) The consumer's expected utility from purchasing this insurance and not going to the gym is

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.3P

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